News flash!! Housing downturn culprit discovered!!!

By
Real Estate Broker/Owner with Bryant Tutas-Tutas Towne Realty, Inc BK607690

Hi folks. As I was reading my daily "Early Bird News" put out by our Florida Association of REALTORS® I was enlightened by the real reason for our housing downturn. This may come as a shock to some of you......are you ready?

Speculators may have accelerated housing downturn!

Speculators! Who would of thunk it. Well I sure did. My market, Poinciana Fl, was raped by speculators. It seems like every "investor" from NY and South Florida swooped down on Poinciana to purchase every new construction home they could with the intent to flip for a profit.

The appeal was new houses that could be bought in the mid to high 100s that would have cost them $300,000 to $400,000, or more, in the areas they were from. It seemed like an easy game plan. Purchase for $175,000 in Poinciana and then by the time construction was complete turn around and sell it for $275,000 and make a nice tidy profit. Some speculators got lucky and did.

The problem was they got lucky by selling it to another Investor who then thought they could sell it for $350,000 but couldn't. So now these properties sit empty. They can't sell them and they can't rent them.

Now they are attempting to get a "short sale". But here's the problem. When they purchased the property they bought them under the pretense of being their primary residence. Even though that was never the intent, they figured by saying it was a primary residence, they would qualify for a 100% loan. And they did. But they lied and actually committed "Occupancy fraud".

Now when they apply for the "short sale" their lie will be exposed and the "short sale" will be denied AND the Lender could very well go after them for fraud.

What these "Investors" didn't realize is that "end users" in Poinciana aren't willing to purchase a home for more than about $225,000. Poinciana is a blue collar and service industry community. Most folks that can afford $250,000 for a home will not buy in Poinciana.

Poinciana is now in dire straights and it will take quite a while to come out of it. In January there were 19 closings. There are currently 1,157 active listings. That's a dismal absorption rate of 1.6% or 5 years worth of inventory!!

In all fairness, speculators weren't the only reason there's now a housing downturn. But they were certainly a major part of it in Poinciana Fl. But this too shall pass. It will just take time. In the meantime, there are starting to be some very good buys in Poinciana. Check out the house below. Do you want to buy it?

Poinciana Real Estate Poinciana Real Estate Poinciana Real Estate Agent

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Florida Osceola County Poinciana
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Rainer
212,127
Carol Smith
Casmi Photography - Mebane, NC

BB - that's a great price!  The inventory levels stink, but your market is not alone there.

That house up here would be a solid $275K or more.  Especially on a lot that size. 

Feb 06, 2008 01:55 PM #20
Rainmaker
251,188
Katrina Madewell
Charles Rutenberg Rlty- More than 5,000 agents(813) 777-1196 - Tampa, FL
Tampa FL Homes for sale | Tampa Bay - (813) 777-1196
BB I love how you always just 'put it all out there'... you clients must love your personality, we Active Rainer sure do......
Feb 06, 2008 05:34 PM #21
Ambassador
248,429
Jesse & Kathy Clifton
Jesse Clifton & Associates, REALTORS® - Fairbanks, AK
Retired

That is a lot of inventory.  Our $300K+ market is pushing 4 years worth but market wide we're just shy of a year, which is a lot for us.  A couple of years ago we built a house for a couple that during construction, they bought and closed on two houses in Ft. Lauderdale.  They were lucky enough to sell one and make a decent profit... they missed the curve on the second one and it cost them $15K to sell - above and beyond the profit from the first house. There are only so many times that investor resell shell game is going to work before someone gets caught with their pants down. 

Feb 06, 2008 08:03 PM #22
Rainer
165,557
Dan Forbes
Bradenton, FL
BB- I don't think there is much sympathy for the liars and the fraudsters.  Others simply made terrible financial decisions.  Life can be hard....if we make it so.
Feb 06, 2008 11:07 PM #23
Rainmaker
418,922
Connor T. MacIvor
RE/MAX of Valencia CA - Paris911 - Valencia, CA
SCVnest.com - (888)SCVnest

I suppose it could not go the way it was going forever.  I still think that there are some that could have explained more - and those buyers that could have asked more questions, not being blinded by the headlights...

Great Post Brother

Connor with Honor

Feb 07, 2008 12:49 AM #24
Rainer
155,553
R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

I really don't have a problem with people seeing an opportunity to make some money and taking advantage of it (as long as they don't do anything fraudulent), but these same folks need to understand that when your making money from the balloon inflating that you're running the risk of the balloon popping.

A lot of people made a lot of money, but when you see tv programs coming on that "show you how to do it" I think that it's probably a safe bet that the bubble bursting is getting pretty close.

I noticed this here in St. Louis with the flipping market.  For years when I would flip a property, I could usually outbid my competition and since I did quite a bit of the work myself still make a decent profit for my work.   Then it got "popular" and beat up homes started selling for close to what the retail price for those homes was.  

Quite a few of these homes ended up sitting there unsold.  The folks SHOULD have known better than to pay that much for them, but they took the risk and are now reaping the rewards or lack thereof...

 

Bob Mitchell

ValueList Real Estate Services, Inc. 

Feb 07, 2008 02:24 AM #25
Rainer
70,478
Jan Wood
None - Gallatin, TN
Bryant:  I believe any one of us could have written this article in the Year 2005 or earlier.  Wow!... speculators were rampant and many very lucky and made a lot of money.  Now, we have to deal with the situation.
Feb 07, 2008 02:34 AM #26
Rainmaker
223,971
Laurie Mindnich
Centennial, CO

BB, when the second wave of investors drop in, the mess will clean itself up- do you suppose that it's possible for them to purchase homes from their jail cell? 

Feb 07, 2008 03:11 AM #27
Rainmaker
1,346,315
Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!
These investors all subscribed to the bigger sucker theory...unfortunately there is a limit to how many suckers there are! Same over here in Brevard County!
Feb 07, 2008 03:46 AM #28
Rainmaker
1,120,837
Bryant Tutas
Bryant Tutas-Tutas Towne Realty, Inc - Poinciana, FL
Broker/REALTOR, Tutas Towne Realty, Inc

Well hey everyone. I didn't really abandon this post I have been out working all day. Don't you hate it when work interferes with our blogging? I know I do!!!

Anyway......as always I appreciate you guys stopping by. Great comments!!!

Feb 07, 2008 07:59 AM #29
Rainmaker
129,707
Jim Little
Ken Meade Realty - Sun City, AZ
Your Sun City Arizona Realtor
BB: In AZ it got bad enough the House Of Clowns actually passed a state law defining 2 types of Mortgage Fraud, Fraud for Housing. That's the little guy trying to buy a home, and Fraud for Gain, which includes occupancy fraud. You did a great service bringing this out as a factor agents should investigate if they are going to attempt a short sale listing.
Feb 07, 2008 10:26 AM #30
Rainmaker
895,937
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F
I was listening to Clarke Howard on the radio yesterday and he stated that in some of the speculative markets like Floirda and Nevada that nearly 20% of new construction houses and condos were sold to speculators who had no intent of ever occupying the property.  So now as many of these properties are getting foreclosed, there are no owner occupant buyers because there are 20% more properties than there are owner occupants.  The buyers just simply don't exist even if the mortgage market were to correct itself.
Feb 07, 2008 11:05 AM #31
Ambassador
736,163
Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Broker Bryant,

Like Jim said, we have our share of "fraud for gain" in Arizona.  Tucson has been hit pretty hard in some neighborhoods, with positive results for home buyers at the expense of those speculators who "may" have accelerated the housing downturn."

Mike in Tucson

Feb 07, 2008 09:33 PM #32
Rainmaker
453,149
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Excellent Post Broker Bryant- I agree with the analysis and yes, in your area, it is a dire forecast.  5 year inventory...Wow!   Being as masterful as you are, no doubt you will find a way to make your listings sell well above avergae time your inventory of homes ais good AND YOU ARE OFFERING EXCEPTIONAL VALUE TO YOUR BUYERS-

Good Luck and Sell well!

Feb 07, 2008 10:46 PM #33
Ambassador
3,579,432
Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital
Bryant, that looks like an awful lot of house for the money - you ought to be able to tempt a few Rainers from up where it's cold and a 300 sf efficiency apartment sells for double that.
Feb 07, 2008 11:54 PM #34
Rainmaker
362,047
Alexander- Slocum
Adamas Realty - Vancouver Washington - Vancouver, WA
Realty Team- Vancouver WA Real Estate

BB - we concur.  The speculators did a fair amount of damage in our SW Washington market as well.  We are trying to work through the extra inventory however, it is hard to restrain the builders that want to keep on building and adding to the inventory!

John

Feb 08, 2008 07:02 AM #35
Rainer
138,818
Paul Silver
Tiverton, RI
Rhode Island full service real estate firm

Hi Bryant: I like that you used the phrase "specualtors" in the beginning... the term "investor" is somewhat different in usage than the term "speculator" and I would agree for the most part that they are the culprit in much of the current state of the market...

There is a long tradition in this country in regard to Speculators in Land, whihc is as old as the country, or older, and many of the founding fathers were involved in land speculation... of course, back then, the land was going to become populated, and the deals were good ones...

Many of these guys lost their shirts when the revolution came along, as much of the title work was done in England, and was revoked in the new governement... that is when G. Washington and others bought up as much as they could, and had to fight over their claims that dated to before the war...

We have not got the war as an excuse now, but it looks like we still  have speculators...

Great post... 

Feb 08, 2008 07:12 AM #36
Ambassador
2,509,272
Nestor & Katerina Gasset
International Properties and Investments LLC - Wellington, FL
Realtors, Wellington Florida Homes For Sale
Bryant- Speculators were the main culprit here too. But many of them were the very folks that live here who just did it to themselves! Pay back's a bummer! 
Feb 08, 2008 09:47 AM #37
Rainmaker
46,031
Sarah Nopp
South Sound, WA
I think this may be one of the main reasons we haven't had the horrendous down markets like your area. We simply weren't seeing that kind of escalation brought about by speculators. There was enough to go around, and we are too connected to a larger real estate market for the impact to be too dramatic in anyone part of the market. I am not saying Speculators didn't have an impact here, but it was nowhere near the warm parts of the country.
Feb 11, 2008 09:23 AM #38
Rainer
225
Cheryl Casey
Weichert - Chatham, NJ

5 years worth of inventory, wow, now might be a good time to pounce on the right home! My area in NJ has 6 months and that is nothing in comparison. 

May 15, 2008 01:15 PM #39
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